[tijlover]

It would be nice to hear from the lucky ones, who sold at the peak, moved to a state where property was cheaper, and were able to pay cash for their new residence, with money leftover, just like the Californians who come here!

I only know one, a nurse I worked with. Sold at the peak, paid cash for a bigger house in San Antonio, with $60k into the bank! Middle Class lifestyle preserved!

[MadManofBethesda]

Originally Posted by tijlover

It would be nice to hear from the lucky ones, who sold at the peak, moved to a state where property was cheaper, and were able to pay cash for their new residence, with money leftover, just like the Californians who come here!

I only know one, a nurse I worked with. Sold at the peak, paid cash for a bigger house in San Antonio, with $60k into the bank! Middle Class lifestyle preserved!

Now you know two.

Well, almost. I didn't sell at the peak in D.C., but I did move to a state where property was much, much, cheaper, paid cash for my new residence, and had money left over.

[yellowsnow]

So, let's say we are discussing people who are square, honest, working folk. They didn't buy as investors, they bought a home to live in and didn't use it as an ATM. They just got a regular mortgage and make regular payments. Is it fair to say that most people who bought from 1995 to 2010 are underwater?

I paid cash for my house in 2008, 150K. Today, Zillow says it's worth 95K. We all know Zillow is consistently wrong, in this case they have over-valued my house. The house next door to mine is 1000sf larger and valued by Zillow at 100K. The people living there now bought the house in April for 75K. That would make my house actually worth about 60K.

It's all good because I have no mortgage and I bought the home as a place to live, not a piggybank. But if I have a mortgage like the average Joe, I would be sweating bullets 24/7. What if I lost my job or was transferred to another city? I guess I would try to rent out my house.

For the first time, I noticed rental estimates as well. Maybe those are as far off as the projected sales prices? It says I could rent my house for $1100/month and my neighbor for 1500. If this is true, rents are seriously skewed and we should still all be buying properties to rent because they would be paid for in no time at all.

So the good times are gone and Joe will not make a profit in his lifetime. How long will it be till he can at least break even?

[von949]

Originally Posted by tijlover

It would be nice to hear from the lucky ones, who sold at the peak, moved to a state where property was cheaper, and were able to pay cash for their new residence, with money leftover, just like the Californians who come here!

I only know one, a nurse I worked with. Sold at the peak, paid cash for a bigger house in San Antonio, with $60k into the bank! Middle Class lifestyle preserved!

I have family on both sides of the equation. A lot of people HEAR/READ stories about the bummed out middle class that lost it all because of the housing bust. I sit down with in-laws every weekend over a beer or two(or 10) about it. Straight from the horses mouth.

I have about 9 family members in Vegas that did great in the housing market. End of story. This is why the media is not interested in in these stories. Who wants to read about someone's success?

On the other hand, I have 3 family members that did terrible. They refinanced too late, purchased right before the bubble burst, and were involved in construction. Perfect storm. You read about these stories all the time. I guess it makes for good entertainment. I can get together with them at a BBQ and laugh and joke about it now, but it wasnt like that a couple of years ago. One of my cousins pulled out over 100K cash in a refinance. The only thing he has to show for anything is a paid off Cadillac Escalade and some crazy wild stories. He has since bounced back and doing ok with multiple part time jobs.

Another one pulled out a ton of equity(don't know exactly how much) and started a landscaping business. Business is not doing so well but he is making ends meet.

The third in-law's story is SUPER complicated. Husband and wife team. The rumor is that they started out doing very good in the early-mid 2000s with buying and selling half-million dollar homes. Then they were doing great with flipping twice as many homes as before. The supposedly had a "net worth" of about $7 million.

Their problem was that one house was paying for the other house until they could sell another house so they could refi the current house while they lived off of equity of this house, while they purchased that house...and so on. (I wrote it like that on purpose) They even purchased small commercial peoperties.(strip mall) They were really doing it big. Today, they do not own a single peice of real estate. Yet they do have tons of toys(boats, 4-wheelers, jet-skis, big trucks, sports car, etc)

The negative stories are way more interesting than the positive. This is why you do not hear about them. I believe that there are a lot more success stories than any other out there. By the way, my in-laws that did bad in the housing market are probably still in the middle-class range. The housing market was actually lifting them slightly above average middle-class or maybe higher(if done right). Now they are just back to where they started.

[von949]

Originally Posted by yellowsnow

So, let's say we are discussing people who are square, honest, working folk. They didn't buy as investors, they bought a home to live in and didn't use it as an ATM. They just got a regular mortgage and make regular payments. Is it fair to say that most people who bought from 1995 to 2010 are underwater?

I paid cash for my house in 2008, 150K. Today, Zillow says it's worth 95K. We all know Zillow is consistently wrong, in this case they have over-valued my house. The house next door to mine is 1000sf larger and valued by Zillow at 100K. The people living there now bought the house in April for 75K. That would make my house actually worth about 60K.

It's all good because I have no mortgage and I bought the home as a place to live, not a piggybank. But if I have a mortgage like the average Joe, I would be sweating bullets 24/7. What if I lost my job or was transferred to another city? I guess I would try to rent out my house.

For the first time, I noticed rental estimates as well. Maybe those are as far off as the projected sales prices? It says I could rent my house for $1100/month and my neighbor for 1500. If this is true, rents are seriously skewed and we should still all be buying properties to rent because they would be paid for in no time at all.

So the good times are gone and Joe will not make a profit in his lifetime. How long will it be till he can at least break even?

The break even point for those that purchased in 2006 is probably non-existent. My neighbor purchased her house brand new for almost 350K in 2006. I purchased my house(exact same floor plan-one year newer) for 125K last year. Zillow currently says $120K for mine and 118 for hers. Just don't ever see it climbing back up there again.

[nfapps]

There will always be different opinions on the causes of issues like this, but no matter what, and no matter how certain individuals want to vilify banks, corporations, "rich people" etc, these types of burdens will always fall squarely on the backs of the middle class by virtue of the numbers.

[WestieJeff]

I think a lot depends on area.

Anthem and Green Valley Ranch homeowners who bought new (circa 1995-2001 depending on area) aren't underwater unless they refi'd and took cash out.

I'm looking at houses in Anthem that sold for 260-280k'ish new (around 2000) and are selling for between 260-350k.

Originally Posted by yellowsnow

So, let's say we are discussing people who are square, honest, working folk. They didn't buy as investors, they bought a home to live in and didn't use it as an ATM. They just got a regular mortgage and make regular payments. Is it fair to say that most people who bought from 1995 to 2010 are underwater?

[vtvette]

Like all bubbles that inevitably burst individuals ran up the price on their own accord. Banks were willing participents as they were making money writing the mortgages as were Investment Firms who were making money hand over fist through CDO's. It's fundamentally no different than any other mania - Tech Stocks in the 90's, the Japanese land market bubble of the 80's (during the height of which the Imperial Palace grounds were valued by some as greater than all the real estate combined in the state of California!) the US stock market bubble of the 1920's, the list goes on and on. The creation of most bubbles can be traced back to three factors:

1) Speculative "investing"

2) Easy credit and/or lax lending practices which generally results in an over use of leverage enabling people to make purchases/investments against what would generally be considered the sensible norm.

A primary factor that drove the housing bubble is that most people viewed (view) their house as an Investment. A house is NOT an investment it is an asset:


Investing:
Investment: The process of allocating items of value (time, capital or resources) resulting in the reasonable expectation of a predictable, quantifiable returns through analyzing and measuring empirical date.

Speculation: The process of allocating items of value (time, capital or resources) in the hope of producing a positive return. Speculative Investing is generally linked to the hope of higher returns than are normally deemed reasonable and prudent as compared to average historical returns in a given market.

Asset: An item or resource owned by an individual or corporation with exchange value.

Assets generally produce utility or some variation thereof. An automobile gets you from point A to point B. It has value and produces utility but is not an investment as it produces no expected, quantifiable return on monies spent. Assets may rise or fall in value but those movements are not predictable and should not be considered in the purchase price of an asset. Assets are purchased for utility, use and/or enjoyment. Assets do not produce quantifiable gains. Houses (in the form of a primary residence) are Assets providing comfort, shelter and enjoyment but are NOT investments as a primary dwelling in no way produces income through quantifiable, predictable gain. Houses may increase in value over time but, this is not the generation of income this is the appreciation of an asset.

This flies in the face of the terms conventional media use. Most of the time you hear advertisements refer to primary dwellings as "Investments". The term "Investment" is largely used when someone is trying to sell you something. Everyone knows "Investing" is smart so people try to wrap the purchase of their product as an "Investment".

It is commonly considered prudent to purchase a house with 20% down and a purchase price no greater than 3 times the annual household income. If a couple make a combined $50,000/year they should prudently be looking at houses in the $150,000 range with a down payment of $30,000. Stepping outside these basic guidelines is generally grounds of speculation.

[SportyandMisty]

A recent book I read asserts that $1.6 trillion of wealth was destroyed during the Great Recession. Or maybe it was $16 trillion.

But... the OP references the middle class - and there doesn't appear to be much agreement on the definition of the middle class.

[vtvette]

Originally Posted by SportyandMisty

A recent book I read asserts that $1.6 trillion of wealth was destroyed during the Great Recession. Or maybe it was $16 trillion.

But... the OP references the middle class - and there doesn't appear to be much agreement on the definition of the middle class.

It seems the "poor" and "middle class" are living better today then at any point in history. Multiple car homes are not at all uncommon. The latest gadgets are now accessible to most everyone if not as soon as they are released then within a very short period of time where in decades past the newest technologies were only available to the truly rich. Homes considered middle class or even poor have huge TV's, cable/satellite service, game systems, computers, etc.

It seems people live more comfortably now, even in lower income brackets, than ever before.

So far as savings and wealth, people are saving less than ever but that I believe that is a matter of choice and lifestyle vs. economic times.